Thomas Palley

Domestic political economy has historically been constructed around the divide between capital and labor, with firms and workers being at odds over the division of the economic pie. Within this construction labor is usually represented as a monolithic interest, yet the reality is that labor has always suffered from internal divisions. Globalization sharpens these divisions, which helps explain why corporations have been winning and workers losing. (more…)

Thirty years ago the economic debate between Democrats and Republicans was framed in terms of the case for bigger versus smaller government. Democrats emphasized market proclivities toward monopoly and inequality, failure of markets to efficiently provide public goods, market incentives to pollute, and above all the tendency of markets to produce less than full employment. Republicans countered that such market failures were over-stated. More importantly, using government to solve market failures could lead to even worse problems of government failure associated with bureaucratic inefficiency, policy misjudgments, and private capture of regulatory agencies. In an imperfect world, Republicans argued that it is better to live with the problem of market failure and opt for small government, than try and solve it by resort to big government. (more…)

If you have a pulpit and say something over and over again, that something may eventually come to be believed. No one has a bigger pulpit than Alan Greenspan, Chairman of the Federal Reserve, who for the last decade has been saying that the secret of America’s prosperity is its economic flexibility. But there is another explanation, which is asset bubble Keynesianism. It too can make for a jolly old time – at least for a while. (more…)

In economics there is a phenomenon known as the “winner’s curse” whereby the winner of an auction over-pays. The most that she should have paid is the second-highest bid, which is the highest value attached by all other bidders. This curse provides a useful analogy for thinking about the recent selection of Federal Reserve Chairman Alan Greenspan’s replacement. There is a good chance that the winner, Ben Bernanke, may end up with a bout of the winner’s curse. (more…)